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History ofMalaysia
Prehistoric period Paleolithic  Lenggong Valley c. 2,000,0000 BCE Mesolithic  Niah cultures 65,000–40,000 BCE Neolithic  Bewah man/woman 16,000 BCE  Perak man/woman 11,000–200 BCE  Neolithic Klang 500 – 200 BCE
Early kingdoms Ancient Kedah <100 BCE Chi Tu 100 BCE–642 CE Langkasuka 100 BCE–1474 CE Gangga Negara c. 100 CE–1025 Pan Pan 424–775 Old Kedah 170–1135 Old Pahang 449–1454 Srivijaya 700s–1025 Majapahit 1300s
Rise of Muslim states Kedah Sultanate 1136–present Samudera Pasai Sultanate 1267–1521 Brunei Sultanate 1368–present Malacca Sultanate 1402–1511 Sulu Sultanate 1450–1899 Pahang Sultanate 1470–1623 Aceh Sultanate 1496–1903 Pattani Sultanate 1516– 1902 Johor Sultanate 1528–present Perak Sultanate 1528–present Sarawak Sultanate 1599–1641 Selangor Sultanate 1766–present Besut Kingdom 1780–1899 Setul Kingdom 1808–1916 Reman Kingdom 1810–1902 Kubang Pasu Kingdom 1839–1864
Colonial period Portuguese Malacca 1511–1641 Malay-Acehnese conflicts 1528–1629 Dutch–Portuguese War 1601–1661 Acehnese invasion of Johor 1613 Acehnese conquest of Perak 1620 Dutch Malacca 1641–1824 Pahang Kingdom 1770–1881 Straits Settlements 1786–1946 Siamese invasion of Kedah 1821–1826 Anglo-Dutch Treaty 1824 Burney Treaty 1826 Naning War 1831–1832 Kingdom of Sarawak 1841–1946 Separation of Perlis from Kedah 1843 Crown Colony of Labuan 1848–1946 Pahang Civil War 1857–1863 Larut Wars 1861–1874 Klang War 1867–1874 Pangkor Treaty 1874 Perak War 1875–1876 British Malaya /Borneo 1874–1946 Jementah Civil War 1879 North Borneo 1882–1946 Pahang Uprising 1891–1895 Mat Salleh Rebellion 1894–1905 Federated Malay States 1895–1946 Anglo-Siamese Treaty 1909 Unfederated Malay States 1909–1946 Battle of Penang 1914 Kelantan rebellion 1915
World War II Japanese occupation of Malaya / Borneo 1941–1945 Malayan campaign 1941–1942 Bornean Campaign 1941–1942 Battle of Muar 1942 Parit Sulong Massacre 1942 Battle of Singapore 1942 Sook Ching 1942 Syburi 1942 Sandakan Death Marches 1942–1945 Si Rat Malai 1943–1945 Jesselton revolt 1943–1944
Formative period BMA of Malaya/Borneo 1945–1946 Crown Colony of N. Borneo/Sarawak 1946–1963 Anti-cession movement 1946–1963 Malayan Union 1946–1948 Federation of Malaya 1948–1963 Malayan Emergency 1948–1960 Baling Talks 1955
Independence period Malayan Independence 1957 Singapore self-governance 1959 ISA 1960 1960–2012 Sarawak Insurgency 1962–1990 North Borneo self-governance 1963 Konfrontasi 1963–1966 Sarawak self-governance 1963 Formation of Malaysia 1963 Singapore in Malaysia 1963–1965 ASEAN Declaration 1967 Second communist insurgency 1968–1989
Modern period 1966 Sarawak constitutional crisis 1965–1966 13 May incident 1969 National Operations Council 1969–1971 Declaration of Rukun Negara 1970 New Economic Policy 1971–1990 Federal Territory of KL 1974 1977 Kelantan Emergency 1977 Pedra Branca dispute 1979–2008 South China Sea dispute(Spratly) 1980–present Dawn Raid 1981 Federal Territory of Labuan 1984 Memali incident 1985 Sabah Emergency 1986 Ming Court Affair 1987 Operation Lalang 1987 Constitutional crisis 1987–1988 Peace Agreement of Hat Yai 1989 Royal Immunity Amendments 1993 Asian financial crisis 1997–1998 Reformasi Movement 1998–2022 Federal Territory of Putrajaya 2001 2008 Malaysian Opposition Wave 2008 2009 Perak constitutional crisis 2009 H1N1 flu pandemic 2009–2010 Lahad Datu standoff 2013 Sedition Dragnet 2014 1MDB scandal 2015–present Pakatan Harapan takeover 2018 COVID-19 pandemic 2020–2022 Political crisis 2020–2022 Bornean Amendment 2021–2023 Green Wave 2022–present 2023 Sabah political crisis 2023
Incidents Brunei revolt 1962–1966 North Borneo dispute (Philippine militant attacks) 1962–present Singapore race riots 1964 Brunei's Limbang claim 1967–2009 Penang Hartal riot 1967 Ligitan and Sipadan dispute 1969–2002 Kuala Lumpur flash floods 1971 Malaysian haze crisis 1972–present AIA building hostage crisis 1975 National Monument bombing 1975 Campbell Shopping Complex fire 1976 Sabah Air GAF Nomad crash 1976 Japan Airlines Flight 715 incident 1977 MH653 incident 1977 1982 Bukit Merah radioactive pollution 1982 1985 Lahad Datu ambush 1985 Memali Incident 1985 Penang terminal bridge collapse 1988 Taufiqiah Al-Khairiah madrasa fire 1989 Kuala Lumpur–Karak Highway crash 1990 Bright Sparklers disaster 1991 Highland Towers collapse 1993 Genting landslide 1995 MH2133 incident 1995 Pos Dipang mudflow 1996 Tropical Storm Greg 1996 Nipah virus outbreak 1998–1999 2000 Sipadan kidnappings 2000 Al-Ma'unah incident 2000 Sauk Siege 2000 2001 Kampung Medan riots 2001 2002 Taman Hillview landslide 2002 Indian Ocean tsunami 2004 2006–2007 Southeast Asian floods 2006–2007 Bukit Antarabangsa landslide 2008 Attacks against places of worship 2010 2010 Cameron Highlands bus crash 2010 Hulu Langat landslide 2011 2013 Genting Highlands bus crash 2013 MH370 incident 2014 MH17 incident 2014 2014–15 Malaysia floods 2014–2015 Sabah earthquake 2015 2015 Plaza Low Yat riot 2015 Movida Bar grenade attack 2016 Kim Jong-nam's Assassination 2017 Darul Quran madrasa fire 2017 2018 Subang Temple riot 2018 2019 Kim Kim River toxic pollution 2019 2020-21 Malaysia floods 2021 LRT train collision 2021 2021-22 Malaysia floods 2021–2022 2022 Batang Kali landslide 2022 2023 Elmina plane crash 2023 2024 Lumut helicopters crash 2024 2024 Ulu Tiram police station attack 2024 2025 Putra Heights pipeline fire 2025 2025 Gerik bus crash 2025
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Since itsformation in 1963,Malaysia'seconomic performance has been one of Asia's best. Realgross domestic product (GDP) grew by an average of 6.5% per year from 1957 to 2005. Performance peaked in the early 1980s through the mid-1990s, as the economy experienced sustained rapid growth averaging almost 8% annually. Malaysia's economy was greatly impacted by the1997 Asian financial crisis, but recovered.

High levels of foreign and domestic private investment played a significant role as the economy diversified and modernised. Once heavily dependent on primary products such asrubber andtin, Malaysia today is anupper middle-income country with a multi-sector economy based onservices andmanufacturing. Malaysia is one of the world's largest exporters ofsemiconductor components and devices,electrical goods,solar panels, and information and communication technology (ICT) products.^[1]

The earliest form of economic output in the region began with agriculture. Wet-rice (sawah) cultivation was established in the major river valleys of northern Malay Peninsula (Kedah, Perak, Kelantan, Terengganu, Pahang) by the 14th century. In the south (Selangor, Negeri Sembilan, Melaka, Johor), expansion was slower due to peat soils, brackish water, and swamps. While in Borneo, sawah cultivation may have first appeared in highland areas like theKelabit highlands. Coastal Borneo also adopted sawah cultivation, while interior populations (Orang Asli in the Peninsula and tribal groups in Borneo) relied on a mix of hunting, shifting cultivation, and some wet-rice farming. The relationship between shifting (ladang) and wet-rice (sawah) cultivation is debated, but both were often practiced concurrently in early settlements. By the 15th and 16th centuries, sawah cultivation became dominant in traditional Malay village economies.^[2]

Subsistence activities coexisted with the production of marketable goods to trade for items like metalware, glassware, pottery, and textiles. In the Peninsula, tin was a key export, traded with India as early as the 5th century AD. Borneo's iron deposits supported a local industry, notably at Santubong, which thrived from the 11th century onwards. Other major exports included forest products (rattans, aromatic woods, camphor, bird feathers) and sea products (tortoise shells, coral, pearls, trepang).^[2]

TheMalay Peninsula had been a centre of trade for centuries. Various items such asporcelain and spices were actively traded even beforeMalacca and Singapore rose to prominence. TheMalacca Sultanate controlled the Straits of Malacca from its founding in 1402 to the 1511invasion by Portugal. All the trade in the Straits, and especially the spices from theCelebes and theMoluccas, moved under its protection and through its markets.^[3] Malacca overtook Java as the primary trade entrepot from China in the latter half of the 15th century; after thePortuguese control of Malacca,Aceh had overtaken Malacca as the terminus for Indian trade in the early 17th century. In fact, much trade bypassed Malacca after the Portuguese takeover, more goods began the overland trek in the north Malay peninsula and more ships took the alternate route of going through the west coast of Sumatra.^[4]

Increased migration fromQing China occurred in the 1720s had led to more tin and gold mining after theHaijin policy was reversed. Early urban centers were multicultural, with foreign migrants integrating as merchants and craftsmen.^[2]

On the eve of the British presence in the late 18th century, the Malay States operated under a feudal economic system modeled after Malacca's structure. These states formed along major rivers (which also defined state boundaries) and towns developed at river mouths, with villages lining the waterways. Rivers were the economic backbone, generating revenue through taxes and tolls on goods and people using them.^[5]: 89

Malay elites and middlemen as well as indigenous peoples played an important role in the pre-colonial economy.Munshi Abdullah reported that in 1838, he observed how theJakun people brought resin, rattan and aromatic woods to trade with Malays;Ali Iskandar of Johor in 1844 appointed headmen fororang asli in theEndau River area; whileTemenggong Ibrahim posted Malay agents to supervise forest collection in the interior regions. Besides supplying his income through piracy, Temenggong Ibrahim also relied onorang asli and Malays to gathergutta-percha for export to Europe, driven by its growing demand for use in the manufacturing ofunderwater cables. It was also common for Malay chiefs to useDayak labor in the mining industry. As the British madeColonial Singapore more open to trade, the rising demand pushed Malay middlemen to increase the supply of jungle products, disrupting the delicate balance that had long regulated sustainable harvesting.^[6]

British economic influence in the Malay States developed in three phases: the establishment of theStraits Settlements, formalized by theAnglo-Dutch Treaty of 1824; the use of diplomatic treaties to expand British influence; and the facilitation of organized capital and labor migration into the Malay States from 1850 onward. Additionally, the Straits government played a key role in Johor's economic development, partnering with the Johor government in the 1830s to establish opium revenue farms under theKangchu system. The mid-19th century saw a large movement of capital and labour, mostly Chinese, into the Malay States. Global tin prices after the 1840s coincided with the discovery of large deposits of tin in Perak, Selangor andSungei Ujong. Higher demand in tin further coincided with the end of theFirst Opium War in 1842 which saw the opening of Chinese ports that encouraged Southern Chinese labour migrants to Southeast Asia.^{[5]: 15, 19–20}

Before the 1874Pangkor Treaty, Chinese economic involvement depended on Malay rulers, who relied on them to drive the economy. To access resources, Chinese agents aligned with Malay elites. After the treaty, this nexus weakened as Chinese entrepreneurs increasingly turned to the British for business opportunities, forming a strong colonial state-Chinese business alliance. Economic modernization further eroded Malay political power as the British sought to reduce the inefficiencies of the feudal system, though they maintained some Malay dominance to avoid political and financial costs.^[5]: 23

Later, as theBritish started to take over as administrators ofMalaya, rubber and palm oil trees were introduced for commercial purposes. Instead of relying on local Malays as a source of labour, the British brought in Chinese and Indians to work in the mines and plantations and provide professional expertise.

The demand for coinage was met through various silver currencies, including Spanish, East India Company, Mexican, British, and American trade dollars, which traded by weight. Between 1837 and 1857, British India's attempt to enforce the silver rupee in the Straits Settlements failed. With no control over precious metal supply, currency shortages arose, particularly from 1870 to 1893. Early banknotes supplemented metal coins, but a British trade dollar was only approved in 1893. In 1899, the Straits government introduced paper currency, gradually replacing banknotes and reducing silver backing until 1910.^[7]

As Malaya moved towards independence, the government began implementing economic five-year plans, beginning with theFirst Malayan Five Year Plan in 1955. Upon the establishment of Malaysia, the plans were re-titled and renumbered, beginning with theFirst Malaysia Plan in 1965. Malaysia's economic development was remarkable, given its troubled beginnings in the early 1960s and the ethnic partitions that were inherited from centuries of segmented economic development.^[8]

In the 1970s, Malaysia began to imitate the fourAsian Tiger economies (South Korea, Taiwan, the then British Crown Colony of Hong Kong, and Singapore) and committed itself to a transition from being reliant on mining and agriculture to an economy that depends more on manufacturing. In the 1970s, the predominantly mining and agricultural based Malaysian economy began a transition towards a more multi-sector economy. Since the 1980s the industrial sector has led Malaysia's growth. High levels of investment played a significant role in this.^[1] With Japanese investment, heavy industries flourished and in a matter of years, Malaysian exports became the country's primary growth engine. Malaysia consistently achieved more than 7% GDP growth along with low inflation in the 1980s and the 1990s.^[9]

Central planning has been a major factor in the Malaysian economy, as government expenditure was often used to stimulate the economy. Since 1955, with the commencement of theFirst Malayan Five Year Plan, the government has used these plans to intervene in the economy to achieve such goals asredistribution of wealth and investment in, for instance, infrastructure projects.^[10]

A legacy of the British colonial system was the division of Malaysians into three groups according to ethnicity. The Malays were concentrated in their traditional villages, focusing mainly on agricultural activities, while the Chinese dominated Malaysian commerce. Educated Indians took up professional roles such as those of doctors or lawyers, while the less better-off worked the plantations.^[11][12] Chinese businesses in Malaysia developed as part of the largerbamboo network, a network ofoverseas Chinese businesses operating in the markets of Southeast Asia that share common family and cultural ties.^[13] TheReid Commission which drafted theMalaysian Constitution made a provision for limitedaffirmative action throughArticle 153, which gave the Malays special privileges, such as 60% of university entrance (quota). However, after theMay 13 incident of racial rioting in the federal capital ofKuala Lumpur, the government initiated more aggressive programmes aimed at actively establishing a Malay entrepreneurial class through direct intervention in the economy, aimed at alleviating poverty. This was done with the controversialNew Economic Policy (NEP).^[14] Its main objective was the elimination of the association of race with economic function, and the first five-year plan to begin implementing the NEP was theSecond Malaysia Plan. The success or failure of the NEP is the subject of much debate, although it was officially retired in 1990 and replaced by theNational Development Policy (NDP). Current GDP per capita grew 31% in the Sixties and 358% in the 1970s, but this proved unsustainable and growth scaled back sharply to 36% in the Eighties. It rose again to 59% in the Nineties led primarily by export-oriented industries.^[15] This increase in GDP was brought about due to a shift from the traditional agricultural and resource based economy to one based on manufactured goods. From 1988 to 1996, Malaysia's economy expanded at 8 per cent, the second fastest after China, resulting in manufactured goods such as microchips and semiconductors making up 80 per cent of exports. Per capita income doubled from 1990 to 1996. Infrastructure projects were greatly increased in this time. Other countries looked to Malaysia at the time as an example for economic reform.^[16]

The rate ofpoverty in Malaysia also fell dramatically over the years. However, its precipitous drop has been questioned by critics who suggest that the poverty line has been drawn at an unreasonably low level.^[17] The rapid economic boom led to a variety of supply problems. Labour shortages soon resulted in an influx of millions of foreign workers, many illegal. Cash-richPLCs and consortia of banks eager to benefit from increased and rapid development began large infrastructure projects.

This is a chart of trend of gross domestic product of Malaysia at market prices^[18] estimated by the International Monetary Fund with figures in millions of Malaysian Ringgit.

For purchasing power parity comparisons, the US Dollar is exchanged at 1.71 Ringgit only. Mean wages were $6.95 perman-hour in 2009.

From 1988 to 1997, the Malaysian economy experienced a period of broad diversification and sustained rapid growth averaging 9% annually.

By 1999, nominal per capita GDP had reached $3,238. New foreign and domestic investment played a significant role in the transformation of Malaysia's economy. Manufacturing grew from 13.9% of GDP in 1970 to 30% in 1999, while agriculture and mining which together had accounted for 42.7% of GDP in 1970, dropped to 9.3% and 7.3%, respectively, in 1999. Manufacturing accounted for 30% of GDP (1999). Major products include electronic components – Malaysia is one of the world's largest exporters ofsemiconductor devices – electrical goods and appliances.

During the same period, the government tried to eradicate poverty with a highly controversial race-based program calledNew Economic Policy (NEP). First established in 1971 following race riots, commonly known in Malaysia as theMay 13 Incident, it sought to eradicate poverty and end the identification of economic function with ethnicity. In particular, it was designed to improve the distribution of wealth among the country's population. The NEP formally ended in 1991, however, much of it remains in effect through other governmental policies.

The influx of foreign investment led to theKLSEComposite index trading above 1,300 in 1994 and the Ringgit trading above 2.5 in 1997. At various times the KLSE was the most active exchange in the world, with trading volume exceeding even theNYSE. The stockmarket capitalisation of listed companies in Malaysia was valued at $181,236 million in 2005 by theWorld Bank.^[19]

Some of the more visible projects from that period arePutrajaya, a new international airport (Kuala Lumpur International Airport), ahydroelectric dam (Bakun dam), thePetronas Towers and theMultimedia Super Corridor. Proposals that were eventually cancelled include the 95 kmSumatra–Malaysia bridge (would have been world's longest), the Mega International Sea and Air port on reclaimed land inKedah (would have been world's biggest) and the KL Linear City (would have been the world's longest mall and the world's first city built over a river).

Concerns were raised during the time about the sustainability of the rapid growth and the ballooning current account. The mainstream opinion prevalent at that time was that the deficit was temporary and would reverse once imported equipment started producing for export. In spite of that, measures were taken to moderate growth especially when it threatened to overheat into the double digits. The main target was asset prices, and restrictions were further tightened on foreign ownership of local assets. Exposure of local banks to real estate loans were also capped at 20%.

As was widely expected, the current account deficit did narrow steadily, year to year, from 9% to 5% of GDP.

Malaysia has the largest operational stock ofindustrial robots in theMuslim world.^[20]

Malaysia's capital market crossed the RM2 trillion threshold for the first time at the end of 2010. The capital market had achieved an annual compounded growth rate of 11% from RM717bil in 2000 due to rapid economic expansion and strong regulatory oversight that underpinned investor confidence in the Malaysian capital market.^[21]

One of the most significant events in the history of the Malaysian economy was the Asian financial crisis, which caused Malaysia's GDP to shrink from US$100.8 billion in 1996 to US$72.2 billion in 1998. The Malaysian economy's GDP did not recover to 1996 levels until 2003.^[22]

The year 1997 saw drastic changes in Malaysia. There was speculative short-selling of the Malaysian currency, theringgit.Foreign direct investment fell at an alarming rate and, as capital flowed out of the country, the value of the ringgit dropped from MYR 2.50 per USD to, at one point, MYR 4.80 per USD. TheKuala Lumpur Stock Exchange's composite index fell from approximately 1300 to nearly merely 400 points in a few short weeks. A National Economic Action Council was formed to deal with the monetary crisis.Bank Negara imposedcapital controls andpegged the Malaysian ringgit at 3.80 to the US dollar. It also fully suspended the trading of CLOB (Central Limit Order Book) counters, indefinitely freezing approximately US$4.47 billion worth of shares and affecting 172,000 investors, most of them Singaporeans.^[23][24][25]

Prime MinisterMahathir Mohamad refused economic aid packages from theInternational Monetary Fund (IMF) and the World Bank, unlike the other countries affected by the crisis. By refusing aid and thus the conditions attached thereof from the IMF, Malaysia was not affected to the same degree in the Asian Financial Crisis as Indonesia, Thailand, and the Philippines.^{[citation needed]}

Regardless, the GDP suffered a 7.5% contraction in 1998. It however rebounded to grow by 5.6% in 1999.

To rejuvenate the economy, massive government spending was made and Malaysia continuously recorded budget deficits in the years that followed. Economic recovery has been led by strong growth in exports, particularly of electronics and electrical products, to the United States, Malaysia's principal trade and investment partner. Inflationary pressures remained benign, and, as a result,Bank Negara Malaysia, the central bank, had been able to follow a low interest rate policy. The Malaysian economy recovered from the1997 Asian financial crisis sooner than neighbouring countries, and has since recovered to the levels of the pre-crisis era with a GDP per capita of $14,800.^[26][27] Despite the adverse external environment arising from geopolitical tensions and the outbreak of the Severe Acute Respiratory Syndrome (SARS), the Malaysian economy maintained its growth momentum, with growth in the first half of 2003 reaching 4.5 per cent, significantly higher than the 2.6 per cent recorded during the same period in 2002.^[28]

Thefixed exchange rate was abandoned on 21 July 2005 in favour of a managedfloating system within an hour of China announcing the same move.^[29] In the same week, the ringgit strengthened a percent against various major currencies and was expected to appreciate further.

In September 2005, Sir Howard J. Davies, director of theLondon School of Economics, at a meeting in Kuala Lumpur, cautioned Malaysian officials that if they want a flexible capital market, they will have to lift the ban on short-selling put into effect during the crisis. In March 2006, Malaysia removed the ban on short selling.^[30] Some of the measures taken by the Malaysian government in response to the Asian crisis, such as the ban on short selling, were swiftly adopted by the very countries that had previously been critical of the Malaysian response.

Regardless of cause and effect claims, rejuvenation of the economy also coincided with massive government spending and budget deficits in the years that followed the crisis. Later, Malaysia enjoyed faster economic recovery compared to its neighbours. The country has recovered to the levels of the pre-crisis era – as an example, the KLCI Composite Index reached 1,896 in 2014, significantly higher than the pre-crisis record of 1,275 in 1993. While the pace of development today is not as rapid, it is seen to be more sustainable. Malaysia is the world's largest Islamic banking and financial centre.^[31]

In early December 2020, Fitch Ratings downgraded the country's rating from A− to BBB+. Some, such as Hoo Ke Ping at the Kingsley Strategic Institute, suggested that this was because of a lack of communication between the new government and the ratings agency. Others, such as Carmelo Ferlito, from the Centre for Market Education, said it might require something more substantial as the recent budget lacked a strategy for the recovery as well as addressing the political tensions.^[32] Others such as Shan Saeed at Juwai IQI suggested that the agency had lots its relevance as the analysis was "behind the curve".^[33]

• Economy of Malaysia

• Economic history of Malaysia

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